The European carbon market remained relatively stable last week, showing little reaction to the intense volatility affecting surrounding markets as tensions escalated in the Middle East.

The EUA Dec’26 contract initially moved lower in early trading on Monday, briefly slipping below €68 before rebounding the following day to an intraday high of €74.84 amid speculation of increased coal demand following the sharp rise in gas prices. By the end of the week, prices had broadly returned to the previous week’s closing level, posting a modest gain of 0.40%.

In contrast, energy markets experienced extreme volatility. The TTF front-month contract surged 67%, while Brent crude gained around 28% as traffic through the crucial Strait of Hormuz nearly ground to a halt.

Meanwhile, on European stock markets, the STOXX 600, a product that allows investors to gain exposure to the top 600 firms in Europe, marked “its biggest weekly drop in close to a year on Friday,” according to Reuters.

The turmoil on global markets continues on Monday amid fears of a prolonged war with Iran. “Over the weekend, there were no signs of de-escalation. If anything, the situation appears to be deteriorating further,” ING analysts wrote this morning.

In early trading, Brent crude surged to its highest level since mid-2022, marking “the biggest-ever absolute price jump in a single day,” as stated by Reuters, after major oil producers such as Iraq, Kuwait and the UAE cut output amid shipping disruptions. Gas prices also briefly soared to a new three-year high of €69.50, while European bourses traded in the red amid fears of rising inflation driven by higher energy prices.

In the current volatile environment, EUAs remain broadly neutral as bullish support from potential coal switching due to high gas prices is counterbalanced by bearish macroeconomic signals.